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Neil McArthur, executive director at the Gambling Commission, said: “This was a systemic failing at William Hill which went on for nearly two years and today’s penalty package - which could exceed £6.2m - reflects the seriousness of the breaches.”

He added that William Hill’s senior management “failed to mitigate risks and have sufficient numbers of staff to ensure their anti-money-laundering and social responsibility processes were effective”.

Conway was jailed for five years and four months last August after admitting carrying out the fraud between August 2009 and May 2016 while working for Dundee City Council.

He stole £1,065,085 in total over seven years - all but £10,000 of which the council has since recovered - after running up debts on gambling websites.

Mark Conway was caged after stealing £1 million from Dundee City Council, half of which he gambled away (Image: Handout)

The 52-year-old carried out the fraud using his “expert knowledge of the authority’s IT systems and his system access privileges”.

He inserted false invoices into the payment process that appeared to have come from the main systems but were not actually recorded in them.

He was then able to capture payments made against the fraudulent invoices and divert them to bank accounts within his control.

He deposited £541,000 of his ill gotten gains with William Hill over a 14-month period after telling them he earned £365,000 a year - a figure they never checked or asked him to prove - when in fact he only earned a salary of £30,000.

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Dundee City Council has mandatory insurance cover called Fidelity Guarantee to protect itself against financial losses incurred by the dishonesty of employees which covered most of the amount stolen.

When the offences came to light, local councillor, Richard McCready, said that while Conway was the actual culprit, banks, William Hill, and the Council apparently failed to take due measures in due time.

He said the fraud was detected, to certain extent, by mere chance, and that Conway could have still been stealing and gambling money away.

Yesterday a Dundee City Council spokesperson said: “Following the discovery of this crime, Dundee City Council has taken action to prevent a fraud of this type from happening again in the future.

“An independent review of procedures has already gone ahead and measures have been put in place to strengthen controls.

“Dundee City Council was involved in ongoing efforts which ensured that the funds taken from the authority by this individual were fully recovered.

“A detailed report on the fraud was discussed in public by the council’s scrutiny committee in December.”

William Hill’s penalty is the second biggest imposed by the Commission, following last year’s £7.8m action against betting firm 888.

The investigation - that covered the period between November 2014 and August 2016 - revealed that 10 customers were able to deposit £1.2 million in cash linked to criminal offences with the bookies.

It was ruled William Hill did not check where the money had come from or if they were problem gamblers (Image: PA)

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One punter exceeded deposits of £147,000 over 18 months with an escalating spend and losses of £112,000. William Hill’s systems identified the issue, but the commission found “its only response over a 12-month period was to send two automated social responsibility emails.

"Our view is that this action alone was not sufficient, given the customer’s gambling behaviour, coupled with the severity of the losses.”

While another was allowed to deposit £653,000 in an 18-month period which activated a financial alert at William Hill.

The alert resulted in a grading of “amber risk”, which meant the customer’s profile should have been reviewed under the company’s anti-money-laundering policy.

The file was marked as passed to managers for review, but that did not happen because of a systems failure. The customer was able to continue gambling for a further six months, despite continuing to activate financial alerts.

William Hill said it had co-operated with the Commission during the investigation.

It added it had committed to an independent review and would work to implement any recommendations following this review.

The bookies will now pay more than £5m for breaching the regulations and the £1.2m they earned from transactions with the 10 customers.

William Hill CEO, Philip Bowcock, said: “We are fully committed to operating a sustainable business that properly identifies risk and better protects customers. We will continue to assist the Commission and work with other operators to improve practices in the areas identified.”

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Julian Dixon, CEO of anti-money laundering and Big Data specialists Fortytwo Data said: “This huge fine is a significant moment for the gambling industry. Money laundering is rife in the betting world because betting shop transactions are in cash.”

Marc Etches, CEO of GambleAware, said: “As the official sponsors of the Scottish Cup, William Hill have undoubtedly let down the tartan army.

“They failed in what should have been their primary concern, which is to look after and protect their customers from gambling-related harm.

“This is one of a number of large fines imposed on the gambling industry in recent months, and so it is clear that gambling businesses need to do a much better job at intervening earlier and protecting their customers from gambling-related harm.”